May 18 (Bloomberg) -- The U.S. oil and gas industry
survived an effort to repeal $21 billion in tax breaks over 10
years as three Democrats broke with Senate leaders who said the
revenue should go to reduce the federal deficit.

Supporters fell short yesterday of the 60 votes needed to
advance the bill after Republicans said the legislation would
raise gasoline prices and increase dependence on foreign oil.
Fifty-two senators supported proceeding and 48 were opposed,
including Democrats Mary Landrieu of Louisiana, Ben Nelson of
Nebraska and Mark Begich of Alaska. Maine Senators Olympia Snowe
and Susan Collins, both Republicans, joined the Democrats.

Democrats said the oil companies can afford to give up the
tax benefits after their combined first-quarter profits exceeded
$30 billion. Senate Majority Leader Harry Reid said he would
work to revive the measure in budget talks with Republicans, who
are trying to cut more than $6 trillion in spending.

“Instead of defending oil companies, Republicans should be
defending the American taxpayer,” Reid of Nevada said before
the vote.

A Republican-backed measure that would increase offshore
production and expedite permits faces a vote today in the
Senate. The legislation mirrors bills passed by the Republican-led U.S. House this month to speed Interior Department rulings
on oil-drilling permits. Without action after 60 days, the
application would be deemed approved.

A provision also would require lease sales in the Gulf of
Mexico and off the coasts of Virginia and Alaska.

‘More Constructive’

“With this vote we hope Congress will now turn to more
constructive policy-making on energy,” Martin Durbin, executive
vice president of the American Petroleum Institute, a
Washington-based industry group, said in a statement.

Landrieu said she opposed the legislation because it
wouldn’t cut gasoline prices and could cost jobs.

Senator Claire McCaskill, a Missouri Democrat, said oil
companies shouldn’t get tax breaks given their profits and the
size of the federal deficit.

“Maybe we shouldn’t pick on big oil, but what a great
place to start,” she said during debate.

The Democratic proposal was not “a serious effort to
address the price of gas at the pump,” said Senate Republican
Leader Mitch McConnell of Kentucky.

Prices for a gallon of gas in the U.S. averaged $3.944 on
May 16, up from $2.867 a year ago, according to AAA.

Virginia, Alaska

Reid said Democrats would resurrect the oil-tax bill as
part of legislation to raise the U.S. debt limit. House Speaker
John Boehner of Ohio has said Republicans won’t accept any tax
increases in the budget negotiations.

The Senate was “right to reject this bill,” which would
hurt consumers, said Bruce Josten, executive vice president for
government affairs at the U.S. Chamber of Commerce, the nation’s
largest business lobby.

“More drilling and more tax breaks won’t lower prices at
the pump,” Frances Beinecke, president of the New York-based
Natural Resources Defense Council, said in a statement. “All it
means is more money for Big Oil companies.”

The White House issued a statement of support for the
Democrat-sponsored bill.

“There are much more responsible ways to utilize the
billions in taxpayer dollars provided to oil and gas companies
through unwarranted tax breaks,” the administration said.
President Barack Obama has called for repealing about $4 billion
a year in oil industry tax benefits.

Obama announced on May 14 plans to increase domestic
drilling by moving ahead on lease sales in the Gulf of Mexico
and in Alaska’s National Petroleum Reserve.

The administration also is extending leases to give
companies more time to comply with new safety regulations added
after the BP oil spill last year.